Questions from study text - Chapter Seven

Question 1

List the key ways in which brokers can demonstrate good conduct when dealing with their clients.

Answer 1

• provision of service excellence;
• high quality of advice and experience;
• transparency of earnings;
• good quality of literature and documentation;
• efficient handling of complaints; and
• avoidance of E&Os

Question 2

Identify four ways in which brokers can achieve service excellence.

Answer 2

• Always doing what has been agreed by the agreed deadline
• Returning client calls and messages promptly
• Ensuring good communication at all times, in the manner that the client wishes to communicate
• Knowing your client
• Ensuring procedures are in place to reduce mistakes (such as a ‘second pair of eyes’ check)
• Contributing to a client culture where the customer’s needs come first.

Question 3

List four characteristics that companies with a strong corporate culture are likely to have.

Answer 3

• Have a clear strategic goal, so that its staff and resources can focus on achieving it
• Have an effective method of communicating the strategy to staff
• Be able to monitor activity and adapt processes and procedures properly
• Set clear targets and goals that are related to the strategic goal
• Reward success in relation to achieving the strategic goal

Question 4

What is the FCA’s definition of a complaint?

Answer 4

Any oral or written expression of dissatisfaction, whether justified or not, from, or on behalf of, a person about the provision of, or failure to provide, a financial service or redress determination, which alleges that the complainant has suffered (or may suffer) financial loss, material distress or material inconvenience.

Question 5

What are the FCA’s rules for brokers in relation to complaint handling?

Answer 5

• Have a formal procedure for dealing with complainants;
• Inform their clients of this procedure (including the address and telephone number to write or call). They must also inform their clients of how to complain to the FOS; and
• manage complainants in accordance with the stated procedures, which the broker should document in the authorised firm’s compliance manual.

Question 6

State three reasons for brokers to take care to avoid E&O claims.

Answer 6

• they are time-consuming, expensive to deal with and damaging to the broker’s reputation;
• they imply fault with the firm’s regulatory standards;
• they cost the business money;
• the policy excess,
• unrecoverable costs in defending the claim, and
• increased E&O insurance premium following the notification

Question 7

List four examples of mistakes that may lead to E&O claims.

Answer 7

• Documentation failures
• The broker’s failure to inform the insurer of a material fact that was disclosed by the client
• The broker’s failure to appreciate the extent of cover (there may be restrictions and limitations and these must be explained to the client fully).
• Non-compliance with warranties which were not brought to the attention of the clients.
• Insufficient, or inaccurate, explanation of the terms to the client.
• Acting beyond their powers
• Failures in management and supervision

Question 8

What are the four fundamental rules for brokers when dealing with E&O claims?

Answer 8

• Follow set procedures stringently. Set procedures will have been written as a result of previous experience and should be trusted.
• Do not conceal a problem or try to resolve it before it is discovered. You must raise the issue immediately. The longer the problem is avoided, the higher its potential for damage.
• Be honest and open about the situation.
• Engage their own professional indemnity insurers at the earliest opportunity and work with them in resolving the problem.